(Adds counter protest by leftist groups)
By Cesar Illiano
BUENOS AIRES, March 25 (Reuters) - Several thousand protesters took to the streets of Argentina’s capital on Tuesday after President Cristina Fernandez refused to back down on a tax hike that has sparked a two-week strike by farmers.
The farmers have blocked roads with tractors and paralyzed grain and livestock markets in the biggest conflict to face Fernandez since she took office in December. The first signs of food shortages have piled pressure on both sides to resolve the dispute.
However, Fernandez looked unwilling to compromise in her first public comment on the strike, which came hours after the farmers vowed to prolong it for “as long as necessary.”
She said the agricultural industry was one of the country’s most profitable despite the recent grains export tax increase, imposed at a time of surging global demand for Argentina’s key exports of corn, wheat, soybeans and beef.
“I’m not going to submit to extortion. I understand the industry’s interests, but I want them to know that I’m the president for all Argentines,” she said in a speech.
Soon after she spoke, several thousand Buenos Aires residents banging pots and pans gathered on street corners and in a central plaza in front of government house.
“I was very sad to hear the president inciting division as ever. Her only plan is confrontation,” one woman in the Plaza de Mayo told local television. Others said they wanted to show support for the striking farmers.
Pro-government leftist groups later marched on the plaza, prompting most of the other protesters to disperse.
Farmers said earlier on Tuesday their strike would continue until the government shelves the new export tax regime, which introduces a sliding scale of duties and substantially raises levies on soy and sunflower sales.
Strike leaders agreed to “continue this strike for as long as necessary,” Eduardo Buzzi, president of the FAA association, told reporters.
The protest marks a sharp escalation in a 3-year-old dispute between the government and the farm lobby, which has been angered by policies aimed at controlling inflation that have included export bans and price controls.
Trade at the biggest grain and cattle markets has ground to a halt since the strike began on March 13, while stores have reported diminishing supplies of beef and some dairy products and grains shipments have been hit.
“At the moment, the majority (of grains exporters) are not operating. Because we’ve ended up with no stock. No grains, no oils and no meal,” said Alberto Rodriguez, director of the Cereal Exporters Center (CEC) and vegetable oil group CIARA.
Argentina is the world’s top exporter of soy oil and meal.
Meanwhile, consumer and retail groups said reports of bare shelves at grocery stores were increasing as the strike dragged on. The protest has also weakened the peso currency due to fewer inflows of dollars from farm exports.
But road blockades have become the most visible aspect of the protest. The demonstrators have been letting trucks pass as long as they are not carrying farm goods, but frustrated truck drivers began clearing barricades themselves in some places.
Government officials have sent some signals of trying to end the crisis, announcing price caps on fertilizers and proposing a special agency for small-scale farmers. But those proposals have not been enough for the strikers, who say the tax shake-up was the last straw.
The government has used levies on grain exports to boost state revenue at a time of exceptionally high commodity prices, and to curb high local inflation that has the biggest impact on the 23 percent of Argentines who live in poverty.
Economy Minister Martin Lousteau said government policy, such as maintaining the peso weak, had helped the sector. “(The farmers) don’t say a single word about the things ... that benefit them,” he told local radio. (With additional reporting by Nicolas Misculin, Miguel Lobianco, Helen Popper and Walter Bianchi; Writing by Helen Popper; Editing by Eric Beech)